Their cooperation and efficiency have enhanced the company's position as a leader of the real estate sector in Saudi Arabia. The company operates exclusively in the Kingdom of Saudi Arabia and its main activity is property development.
T HE C OMPANY ’ S S UBSIDIARIES
- D AR A L -A RKAN P ROJECTS C OMPANY
- D AR A L -A RKAN P ROPERTIES C OMPANY
- Dar A L -A RKAN I NVESTMENT C OMPANY
- D AR A L -A RKAN S UKUK C OMPANY
- S UKUK A L -A RKAN C OMPANY
- T HAWABIT I NVESTMENT C OMPANY
- D AR S UKUK I NTERNATIONAL C OMPANY
- I NVESTMENTS IN S UBSIDIARY C OMPANIES AS D EFINED BY THE R ULES OF THE C APITAL M ARKET
- K HOZAM R EAL E STATE D EVELOPMENT C OMPANY
The company operates in the field of real estate investment and development in the Kingdom of Saudi Arabia. Khozam Real Estate Development Company (Khozam) is established as a limited liability company between Jeddah Development and Urban Regeneration Company (49%), a company 100% owned by Jeddah Municipality, and Dar Al-Arkan (51%).
R EAL E STATE D EVELOPMENT
P ROPERTY M ANAGEMENT AND L EASING
I NVESTMENT A CTIVITIES
T HE S AUDI E CONOMY
C URRENT P OSITION OF THE S AUDI R EAL E STATE M ARKET
Secondly, the Real Estate Development Fund (REDF) provides interest-free loans to promote home ownership and construction. Third, the development of the regulatory environment for real estate will provide an appropriate mechanism to promote investment in the real estate industry.
U PDATE ON M ORTGAGE L EGISLATION AND ITS A NTICIPATED I MPACT
The adoption of the mortgage system in mid-2012 is considered to be one of the most important structural and legislative reforms, bringing a quantum leap in the Saudi real estate legislative environment. The development of large-scale master-planned communities creates growth opportunities for our three business streams, namely sales of land and residential projects, property management and leasing, and investment in real estate-related businesses.
DAAR IS THE F IRST IN S AUDI R EAL E STATE AND C ONSTRUCTION S ECTOR ON F ORBES ME L IST OF THE
P a g e | 19 DAAR's relationship with the International Sukuk market goes back to 2007 and is fully committed to maintaining this relationship going forward. During the year, Moody's Investor Services assigned a Ba3 corporate family rating for DAAR thanks to its strong position in the real estate segment in the Kingdom, liquidity management and conservative financial management. Management is committed to maintaining the relationships with credit agencies and takes every possible step to improve performance for further upgrades.
J UMAN P ROJECT
S HAMS A R R IYADH P ROJECT
Completed infrastructure works include civil works, development of the frontage and entrance to the project and the construction of a bridge that spans a natural valley connecting commercial and residential areas. The construction of two electrical substations (No. 8105 and 8107) was completed and handed over to the Saudi Electricity Company. In relation to water services, the company submitted a water project requirements to the national water company, which began in 2011 with the extension of the main water pipes and the construction of the main water tank for the area.
S HAMS A LAROUS P ROJECT
A L T ILAL P ROJECT
Q ASR K HOZAM D EVELOPMENT P ROJECT
Completed the evaluation of properties to be seized and obtained approval from the relevant authorities for evaluation statements. As for the first phase, the clearance, demolition and disposal works have been completed; The decisions on metering and plot division (Thar'a) were also finalized pending the approval of the relevant authorities to finalize the procedures for preparing an offer to investors. Regarding the second phase: The completed works include a cadastral survey (a comprehensive survey of land and property) and valuation, in accordance with the approval of the relevant authorities to issue evacuation notices to property owners and commence demolition works.
O VERVIEW
A social and economic survey completed by a specialized company targeting the owners of the properties in the project area to determine the social and economic characteristics of the local population and conduct a comprehensive study on their relocation mechanism. Technical studies carried out to determine the infrastructure needs of the entire project, including roads, electricity, water supply, sanitation, stormwater drainage, irrigation and communication networks.
K EY E VENTS IN P ROPERTY M ANAGEMENT AND L EASING
A SSET A CQUISITIONS
M AJOR L EASING A GREEMENTS C ONCLUDED IN 2014
- A L M ASIF
- A L Q ASR C OMMUNITY
- A L Q ASR M ALL
- A T
Hotel for staff accommodation, 506 additional apartments leased to the Ministry of Foreign Affairs, 25 apartments leased to Al Hammadi Hospital and 65 offices and 7 shops leased to Riyadh Municipality. In June, Al Qasr Mall in Riyadh was the proud host of the 10th Riyadh Shopping Festival. HRH Prince Turky Bin Abdullah Bin Abdulaziz, Mayor of Riyadh, inaugurated the official opening of the Festival in a spectacular event that attracted thousands of visitors and further increased the Mall's awareness and popularity.
A WARDS R ECEIVED
The Al Tilal community is another location that is experiencing demand from the business and government sectors. In late 2014, terms were agreed with National Guard Health Affairs to lease 82 villas for staff housing and facilities.
L EASED A REA U NDER M ANAGEMENT
D ESCRIPTION OF THE L EASED A SSET P ORTFOLIO
- A L Q ASR C OMMUNITY
- A L Q ASR M ALL
- A ZIZIA T OWERS
- A L M ASIF
- A L T ILAL
With a rental mix of nearly 3,000 units (2,447 apartments, 102 villas, 348 showrooms and 65 office units), Al Qasr Community is a leading example of well-planned communities in the Kingdom. The Azizia Towers development in Makkah is located in the heart of Azizia Quarter on Prince Sultan Street, just 5.5 km from the Holy Mosque and 3 km from Mashaer Mina. Al Tilal is located in the southwest of Medina, on Prince Sultan Bin Abdulaziz Road, within the area of the Holy Prophet Haram Mosque.
T HE I NCOME S TATEMENT FOR THE F ISCAL Y EARS 2010 TO 2014
T HE B ALANCE S HEET FOR THE F ISCAL Y EARS 2010 TO 2014
P a g e | 35 The Company discloses that for commercial and practical reasons it registers some of its property assets under the name of representatives or agents, in exchange for official documents against them proving the Company's ownership of these assets. However, the Company undertook this action only after legal consultation that ensures the soundness of this practice, which preserves the Company's shareholders' rights.
R ESULTS OF O PERATIONS
- R EVENUES
- C OST OF R EVENUE
- S ELLING AND G ENERAL A DMINISTRATIVE E XPENSES
- F INANCING C HARGES
- N ET OTHER INCOME
- N ET I NCOME
This small decrease in cost of revenue is primarily due to higher gross profit generated from land sales revenue in 2014 compared to 2013. Selling and general administrative expenses were SR 237 million in 2014 compared to SR 151 million in 2013, which representing an increase of 57%. The increase is primarily the result of higher employee costs and higher costs of professional consulting.
L IQUIDITY AND C APITAL R ESOURCES
C ASH F LOWS
The increase of SR 20 million is mainly due to higher income from investments in associates and better financing rates for the investment of cash balance in Islamic deposits. In conclusion from the above, the decrease in net income was driven by higher selling and general administrative costs and financing costs, despite the higher gross profit from higher revenues and margins. The negative difference is mainly related to the increase in receivables, higher advance payments for land purchases and other changes in working capital in 2014.
P ROJECTS AND I NVESTMENT E XPENDITURES
The company's net investments in land and project development mainly led to a total cash outflow in investing activities of SR 1,966 million in 2014. The cash inflow from financing activities of SR 1,664 million came mainly from the issuance of new international Islamic Sukuk for SR 1,500. million during the year, excluding a short-term deposit of SAR 1,175, which is considered cash in some banks.
F INANCING S TRATEGY
In line with its diversification strategy, the Company has successfully established good relationships with local, regional and international banks where it has obtained short and medium term financing mainly through Islamic Murabaha or Ijarah facilities for general corporate purposes. Going forward, the company's financing strategy will continue to focus on further diversifying its sources of financing, including acquiring project-specific financing from local and regional banks, as well as exploring other international Sukuk markets. The company is also building a portfolio of rental properties where these income-generating assets can be pledged as security for loans from financial institutions.
I NDEBTEDNESS
I NCREASE IN F INANCING AT THE END OF 2014
The total funds raised by Sukuk amounted to SR 12.8 billion, of which SR 6.8 billion has already been repaid at the end of 2014, while the remaining SR 6 billion is due to mature within the next 1-5 years. The ratio of long-term financing (Sukuk) to total financing at the end of 2014 was approximately 76%, while short- and medium-term financing was 24%. Furthermore, Dar Al-Arkan's excellent credit record should continue to facilitate access to domestic and international capital markets for the issuance of Islamic Sukuk.
O VERVIEW OF THE S UKUK I SSUANCES AND R EPAYMENTS IN 2014
T HE R EPAYMENT OF THE T HIRD S UKUK I SSUANCE
T HE S EVENTH S UKUK I SSUANCE
P a g e | 41 Geographically, the Sukuk was very popular in the region; 82% of Sukuk participants were from GCC countries and the remainder were from Europe and the rest of the world.
T HE E ARLY P ARTIAL R EPAYMENT OF THE F OURTH S UKUK I SSUANCE
S AUDI H OME L OANS "SHL"
K HOZAM R EAL E STATE D EVELOPMENT C OMPANY (KDC)
During 2014, the Company prepaid SR 1.86 million of this, together with interest of SR 1.22 million for its operational needs.
B ANK A LKHAIR
A LKHAIR C APITAL
B OARD OF D IRECTORS
P a g e | 43 invitation from the Chairman, and in any case the Board of Directors shall consider the need for such convenings. Fahad Bin Saleh AlAjlan dated an independent director representing the General Organization for Social Insurance (GOSI) and appointed Engr. Saleh Bin Mrikhan AlMutairi, independent director, representative of the General Organization for Social Insurance (GOSI), effectively requested as a replacement by GOSI.
B OARD M EETINGS R EGISTER
B OARD C OMMITTEES
T HE E XECUTIVE C OMMITTEE
T HE A UDIT C OMMITTEE
Recommending the board of directors to appoint the auditors and appoint their alternate representative, after satisfying themselves of their independence, and to approve any work outside the scope of the audit assigned to them; review and monitor the auditor's recommendations on financial statements; they see the audit plan with the auditor and discuss all issues within their competence at regular meetings with the auditor; examines the interim and annual financial statements before submission to the board of directors and gives an opinion and recommendation on these statements; regularly reviews the company's accounting guidelines in relation to regulations and initiatives and makes recommendations to the board of directors; decides on all disputes that may arise between the company's management and the auditor regarding his scope and nature of work;
T HE N OMINATIONS AND R EMUNERATION C OMMITTEE , C ONSISTING OF
The following table shows the remuneration and compensation paid to the members of the board of directors and the five senior executives who received the highest bonuses and compensation from the company in 2014. In accordance with the corporate governance issued by the capital market authority, the board of directors approved the company Corporate governance by taking into account the rights of shareholders, customers, employees and all stakeholders and taking care of their interests. The adoption of cumulative voting rights is still under consideration, as the company's legislation does not contain rules on cumulative voting.
P a g e | 49 It is worth noting that the company applied all corporate governance rules issued by the Capital Markets Authority, including mandatory and optional items, except paragraph (b) of Article 6 in relation to the adoption of cumulative voting as a means of voting in connection with election of members to the board at the meetings of the general assembly.
F EATURES OF THE I NTERNAL C ONTROL S YSTEM
R ESULTS OF THE E FFECTIVENESS OF THE C OMPANY ’ S I NTERNAL C ONTROLS
The Company publishes such invitations through the website of the Saudi Exchange Market (TADAWUL), the Company's website and daily newspapers. In this regard, improving the standard of living and preserving the environment are the main goals of society. The company's real estate projects are exhibited to meet the demands of the market and the needs of community members.
W ORLD D RUG D AY
P a g e | 53 As part of its corporate social responsibility, Dar Al-Arkan is on its way to implementing real estate projects for the improvement of social welfare. Dar Al-Arkan is aware of its social responsibility regarding issues concerning the real estate sector, through analysis of problems and innovative solutions. It contributes to the development of the real estate sector in the region, in addition to communicating with different social categories and customers to identify their needs.
R AMADAN A NNUAL C ELEBRATION FOR DAAR E MPLOYEES
An extraordinary project is Qasr Khozam in the center of the city of Jeddah, which is a collaboration between the company and the relevant public authorities for the restructuring of the Qasr Khozam area and its surrounding slums. In addition to its social responsibility, the company has connected the Shams Alarous area with Palestine Street with a 52 meter wide and 4 km long road costing SR 30 million. In addition, the Company participates in exhibitions to support real estate activities as a means of communicating with specialists in the sector and other related sectors to exchange knowledge, expertise and views.
R IYADH S HOPPING AND E NTERTAINMENT F ESTIVAL
P ROPERTY C OMPANY OF THE Y EAR IN THE M IDDLE E AST 2014 BY W ORLD F INANCE
